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June 13th, 2012

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While Denmark’s business leaders and politicians are looking forward to the commercial potential of Chinese president Hu Jintao’s visit this week, some believe that the Chinese are aiming to use improved Danish relations as a stepping stone to an even greater prize: Greenland.

China’s interest in Greenland, a self-ruling overseas territory, is closely linked to the country’s significant deposits of oil, gas, copper, iron, gold and rare earths.

Chinese investors are reportedly are preparing to put 1.3 billion kroner into major infrastructure projects, including three new airports and the expansion of port facilities in Nuuk, the capital city. Berlingske newspaper recently reported that a deal might be signed during Hu’s visit.

Improvements to Nuuk’s port would be a major boon to the international oil companies already drilling in the waters off of Greenland and increased airport capacity has long been high on the wish list of Greenland’s government. The current lack of capacity stands in the way of overall economic growth, especially the expected growth in the oil and mining industries. 

Greenland, whose largest export item is prawns, does not have the capital on its own needed to modernise its infrastructure or exploit its resources, so the government has been open to foreign investors bringing cash and expertise. 

Among the suitors is London Mining, whose Chinese partners are prepared to invest 12 billion kroner in an iron mine in Isukasia, near Nuuk. The company expects to submit a final application to the Greenlandic Bureau of Minerals and Petroleum (BMP), sometime before the summer. After consideration by the BMP, the project must be approved by Greenland’s government.

Should it pass, Greenland stands to earn a billion kroner in tax revenue alone. But establishment of the mine could also make inroads into Greenland’s unemployment woes, if Greenlanders are employed at the project. This however, may not happen. 

Although its agreement with Cairn Energy, an Edinburgh-based oil explorer, calls for the company to hire Greenlanders, few possess the job skills necessary for mining jobs. Meanwhile, other companies are demanding that they be permitted to hire foreign labour and pay them less than the Greenlandic minimum wage.

Aside from employment benefits, proponents of Chinese investment say it will leave behind the infrastructure the country needs to develop but can’t build on its own. But even though the Chinese have a history of investing in infrastructure when they begin prospecting, the quality of their work and their record of using local workers is suspect.

About one million Chinese nationals are currently working in Africa, another place where China is digging and drilling to ensure its own future supply of raw materials.

Although their investments were viewed as a welcome boost by African states – much the same way many Greenlanders see them – some Africans now consider the Chinese to be a mixed blessing. Poor construction, questionable business practices and a reluctance to use local workers brought a swift end to the China’s African honeymoon.

Before Greenlanders cash their cheques from the Chinese, the Africans would most likely advise them to consider the Chinese-built road from Lusaka, Zambia’s capital, to Chirundu, 130km to the south-east, that was quickly swept away during a 2009 rain storm. Unusable roads, unsafe buildings and unfinished projects are part of the Chinese legacy in Africa, according to critics.

Likewise, environmental groups are concerned about the impact the search for oil and minerals will have on Greenland’s environment, an area where China’s record is also spotty.

In one instance, Sinopec, a Chinese oil firm, was criticised for what domestic and foreign environmental critics said were poor and damaging methods during its drilling in Gabon’s Loango National Park. The drilling was permitted, but the country temporarily stopped operations until the company took steps to minimise its environmental impact.

There is also concern that the Chinese and other foreign companies will find a way to work around Greenland’s labour laws, Chinese factories in Africa often pay less than the local minimum wage, and when unions have tried to shut the factories down, the Chinese owners pretend not to understand them.

China has also been accused of hoarding the resources it is removing from African soil, something that is of particular concern when it comes to rare earths. China currently monopolises the market for the minerals, which are vital for use in the electronics industry, but with Greenland reputed to be sitting on some of the world’s largest deposits, many in the West hope Greenland can give companies a less adversarial option.

The EU is expected to sign a deal ensuring that Greenland’s rare earths will be sold on the open market, but Greenlandic lawmakers have also warned against assuming that the country has the same interests as the West.

While the Chinese interest presents something of a dilemma for Greenland's decision-makers looking for way to wean themselves off their 3 billion kroner annual block grant from Denmark, the country’s transport minister, Jens B Frederiksen, would not rule out the possibility that it would swap Copenhagen’s cash with Beijing’s.

"Greenland's government is globally oriented and will work with anyone who will work with us,” Frederiksen told Berlingske. “I cannot see why we should not cooperate with Chinese lenders if they meet our demands.”

Frederiksen would not confirm nor deny that a deal with the Chinese – or anyone else – was on the table.